Request a Demo Today

Dear CEO | Release Date: 20th March 2024

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has released findings from its recent thematic review of retirement income advice. The review highlights a mixed landscape of practices, with some firms providing tailored advice conducive to positive customer outcomes, while others fail to adequately meet customer needs, risking poor outcomes. The review is part of the broader Consumer Investments Strategy aiming to elevate industry standards, especially as the market expands to include newer advice forms.

Since the pension reforms of 2015, which introduced greater flexibility for drawing defined contribution pensions, the complexity of consumer decisions has increased. Consumers now face intricate choices concerning the timing and manner of accessing their savings and the levels of income necessary for short and long-term needs. Advisers play a crucial role in navigating these decisions to ensure suitable outcomes.

The FCA calls for all firms to rigorously comply with existing guidelines regarding information collection, advice suitability, and disclosures. Furthermore, firms are urged to maintain robust systems and controls and actively monitor outcomes to prevent future lapses. Key areas for improvement identified include refining income withdrawal approaches to be more individual-centric, ensuring risk profiling aligns with customer objectives and experiences, and maintaining accurate records to enable ongoing assessment of customer outcomes.

The review also touches upon the Consumer Duty, noting that without corrective measures, most firms would struggle to meet its requirements. The Duty emphasizes good outcomes, acting in good faith, preventing foreseeable harm, and supporting consumers’ financial objectives.

The FCA has introduced tools such as the Retirement Income Advice Assessment Tool (RIAAT) and guidelines on Cashflow Modelling (CFM) to aid firms in enhancing advice quality. It stresses ongoing commitment to supervising and improving retirement income advice.

Key takeaway and action:

Firms should closely examine the review’s findings, assess and enhance their advice processes to align with FCA regulations and the Consumer Duty, and utilise provided tools and guidelines to ensure they deliver well-suited advice and robust customer outcomes.

Back to the Dear CEO letter archives.